Articles & Tips
How Can I Lower My Mortgage Rate?
Lowering your mortgage rate can be a time-consuming process, dependent upon several variables. Fortunately, the Internet is a great resource for shopping around and comparing mortgage lenders and their products, to ensure you get the best mortgage rates available.
If you’re interested in lowering your rate, you have a few options to consider when selecting the mortgage that’s right for you:
Choose your term
The term is the length of time you’ll need to pay your mortgage before it’s paid in full. Because spreading out payments over a longer period results in lower principal payments, generally loans with longer terms will offer you the best mortgage rates, as well as the lowest monthly payments.
Choose your type
Most mortgages fall into two categories: Fixed-rate mortgages and adjustable-rate mortgages (ARMs). Both offer advantages, depending upon your current budget and your financial outlook. Usually, ARMs are associated with lower initial interest rates that adjust upward after a specific period defined in the loan document. These loans are ideal for individuals who expect to see an increase in income or an improvement in their credit scores before the adjustment period occurs, as well as for those who expect to sell their homes in a few years. Fixed-rates offer an interest rate that remains the same for the life of the loan, and are usually the best choice for homeowners planning to stay put for many years. Understanding the difference can help make sure you get the best mortgage rates for your needs.
Check your credit
Across the industry, the best mortgage rates are offered to those with the highest credit scores. To ensure your credit score is at its peak, make sure your credit reports from each of the three major credit bureaus are free of errors. Even small errors can make a big difference in the rates you’re offered. Don’t apply for new loans or credit while shopping for loans. And be sure to pay all your loans on time, especially while shopping for loans – and for best results, for several months prior to loan-shopping.
Verifiable income
Your employment and income affect your score in two ways: a long employment history implies you’re more stable and less likely to default, meaning lenders will look on you more favorably than if you’ve been jumping from job to job.
What’s your equity?
Finally, if you’re refinancing, the amount of equity you have in your home will determine how much you can borrow. To increase your equity quickly, look for simple home improvements you can make to ensure your home is looking its best before the appraisal is ordered.
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